Seafood, garment makers look forward to importing material tariff cuts

Seafood and garment companies have called on the government to lower the tariffs on import materials in order to help them become more competitive on the domestic market.

Though orders from foreign partners have been coming continuously since the beginning of the year, seafood and garment companies are not happy. Le Nguyen Ngoc, Director of Viet Thang Garment Company, said that companies have to struggle to seek input material supply sources to fulfill the orders. The cotton fiber price from domestic sources has increased by 50-60 percent, while companies can only purchase a volume of fiber that is enough to meet 50 percent of the demand. Meanwhile, import input materials are subject to a high tax of 12 percent. Therefore, it is not profitable for enterprises to make products for domestic consumption.

“That explains why Viet Thang has stopped making products for domestic consumption since the beginning of the year,” Ngoc said.

Representative from the Vietnam Textile and Apparel Association (Vinatas) said that in 2010, garment companies had to spend nine billion dollars to import materials. In 2010, garment companies gradually regained the domestic market with the growth rate of 20 percent, but the growth proves to be unsustainable.

The representative has confirmed that since the beginning of the year, since the material price has been increasing sharply, many garment companies have narrowed the production for domestic consumption, while focusing on making products for export. It is because when making products to export, companies can enjoy the zero tax rate on import materials.

Garment companies have warned that it is very likely that Chinese garment products will return to “reoccupy” the domestic market, especially if garment companies still have to pay high tax on import materials.

Similarly, seafood processing companies are also facing big difficulties due to the material shortage. Nguyen Hoai Nam, Deputy Secretary General of the Vietnam Association of Seafood Exporters and Producers VASEP, said the biggest worry of seafood export companies is not the lack of orders, but the lack of materials. Meanwhile, seafood companies have warned that the material shortage may last until September 2011.

The material shortage has forced many seafood companies, including Cuu Long Seafood Import-Export Company, An Xuyen Joint stock Company and Nam Viet Group, keep production at moderate level. Meanwhile, the import tariffs are overly high which makes them hesitant to import materials for local production.

Ngoc from Viet Thang Garment Company said that the State should reduce the tariffs on import materials to the lowest possible levels in order to help garment companies more competitive on the domestic market. VASEP has also proposed reducing the import tariff on import materials to zero percent, stressing that the tax reduction is very necessary at this moment in order to boost exports. The association said that other leading seafood exporters in the world such as China, Thailand, India and Malaysia are importing seafood materials in large quantities since their enterprises can benefit from low tax rates of 0-0.5 percent. Meanwhile, Vietnam is imposing 10-20 percent on seafood material imports.

Nevertheless, doubts have been raised that the tariff reductions may lead to the fact that enterprises would rather import materials than making investment to grow material areas themselves or purchasing materials from domestic sources.

In reply, seafood companies said there is no need to worry about preferring importing materials over domestic materials. The companies always prefer purchasing materials from domestic sources because the prices are always lower than the prices of import materials. As for the products which are the advantages of domestic production, such as tra fish, the government still can apply high import tariff to encourage enterprises to use domestic materials.

Tags: garment, Seafood